Centre Targets Rs 5.91 Lakh Crore from Cess, Surcharge in FY26, Up 9.43%

The central government has budgeted Rs 5.91 lakh crore in cess and surcharge collections for FY26, reflecting a 9.43% increase over FY25’s revised estimates, Minister of State for Finance Pankaj Chaudhary informed the Rajya Sabha on Tuesday. The breakdown includes Rs 4.18 lakh crore from cess (up 8% from Rs 3.87 lakh crore) and Rs 1.72 lakh crore from surcharges (up 13% from Rs 1.53 lakh crore), as per data shared in a written reply.

Chaudhary explained that cess and surcharges, levied under Article 271 of the Constitution, fund specific Union purposes like Centrally Sponsored Schemes, with indirect benefits to states. However, these collections remain outside the divisible pool, which splits gross tax revenue 41% to states, sparking demands from opposition-ruled states to include cess in the pool. Currently, eight cesses are active, including GST compensation cess, health and education cess, and road & infrastructure cess, alongside surcharges on income tax, corporate tax, and customs.

Finance Minister Nirmala Sitharaman, responding to a separate question, detailed that the health and education cess collected Rs 83,071 crore in FY24, with Rs 87,199 crore spent, compared to Rs 69,891 crore collected and Rs 80,010 crore spent in FY23, and Rs 60,616 crore collected and Rs 70,589 crore spent in FY22. The cess, applied at 4% on income tax and surcharge, supports education and healthcare initiatives but has drawn criticism for exceeding collections in expenditure.

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Posts on X highlight state governments’ frustration, with some arguing the Centre’s retention of cess funds strains federal fiscal relations, especially as states face GST compensation shortfalls post-June 2022. The FY26 projections align with the Union Budget’s focus on fiscal consolidation, targeting a 4.4% fiscal deficit, but critics question whether the reliance on non-divisible revenue undermines cooperative federalism.

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